Governance in Indian startups needs to improve and more independent directors are needed on company boards to that end, Flipkart Group CEO Kalyan Krishnamurthy told Moneycontrol in a rare and candid interview.
“Governance in the country on startups has to improve in general. In the last one or two years, a lot of rigour has set in. Compliance, code of conduct – all of these things are evolving and need to evolve at a very big speed,” Krishnamurthy said.
“In fact, in open forums I have suggested that every company's board needs to have a reasonable set of independent directors... which is one of the reasons I believe the startups in many cases have governance issues,” he added.
These comments assume significance given Krishnamurthy is one of the most powerful and influential voices in the Indian startup ecosystem, as he not only runs the country’s largest e-commerce firm but is also a prolific angel investor. It also comes amid a prolonged funding winter and a series of governance lapses in startups after the go-go funding euphoria in 2021.
While acknowledging that day-to-day operational responsibility is with the CEO and CFO, Krishnamurthy said that an independent board is required to ask the tough questions.
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“If you're not independent, and if you have some kind of a vested interest with the company, if you're a shareholder, if you're management, to question yourself is a little bit less easy. That has to be one big thing all of us adopt more and more,” he said.
"When new investors come in, the moment they see a board with independence, 30% of the diligence is done then and there, saying that, 'Oh, there is a gentleman here with 20 years' experience in PwC or KPMG, and they've been on the board for four years. I'm already so reassured'”, he added.
India’s startup ecosystem has seen multiple governance failures, fund mismanagement, exaggerated revenue and even fraud over the past couple of years. These include startups such as BharatPe, Zillingo, GoMechanic, Trell and 4B Networks among others.
The country’s most valued startup until recently, Byju’s has also been struggling and announced a rights issue at a valuation cut of 99 percent earlier this week. The company has been missing provident fund payments and has filed its audited results after a delay of over 12-15 months.
In an exclusive interview with Moneycontrol, Krishnamurthy also spoke about his role as Flipart’s top boss through the years.
“We have customers, we have employees, we have sellers, we have shareholders. We operate in the framework of governments around us, be it very local or state level or country level. My job and I think every CEO's job is to understand what these stakeholders need. And they have to at any point in time strike the right balance of fulfilling all of their needs,” he said.
“I actually believe that is my job… whatever my board structure has been, shareholder structure has been, I have not moved from that. Seven years back, if you asked me this question, it would exactly have been the same. It's a little bit of an academic answer, but that is the right answer. And it will not change,” he added.
He joined the company in June 2016 as the head of its category design and went on to become CEO in January 2017. For Krishnamurthy, this was not the first stint at Flipkart. During 2011 and 2014, he was the director of finance for Tiger Global portfolio companies, which included Flipkart. Prior to joining the e-commerce firm as a full-time executive, he was managing director at Tiger Global, which was one of Flipkart’s earliest backers and a large shareholder before Walmart acquired the company, for two years from 2014 to 2016.
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